A bond has a face value of $1,000 and five years to maturity. This bond has a coupon rate of 13 percent and is selling in the market today for $902. Coupon payments are made annually on this bond. What is the yield to maturity (YTM) for this bond?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is the interest rate that equates the present value of the bond's future cash flows (coupon payments and face value at maturity) to its current market price. Given the bond's coupon rate, face value, market price, and time to maturity, the YTM is calculated to be approximately 16.00%.

A Bond Has a Face Value of $1,000 and Five